Bitcoin ETF gets ASIC nod but alt-coins left out

But the report also warned fund managers that issuing crypto-backed products will come with strict new guidelines, including an expectation they appoint a custodian with specific crypto expertise and at least $10 million in net tangible assets.

They should be able to compensate investors for any custodial assets lost and clearly disclose the risks of investing in crypto assets, including risk of cybercrime, market losses and even the environmental impact associated with mining and maintaining some crypto-coins.

Back to the futures

ASIC took the controversial step to limit inclusion of crypto assets to those with a robust and transparent pricing mechanisms, a large number of institutional backers and – crucially – a relevant futures market for trading linked derivatives.

In practice, that means only bitcoin and ether (tokens validated by the ethereum platform) will meet the criteria to be included in ETFs “at this point in time”, the report confirmed. It is understood some industry participants opposed this proposal, eager to include nascent but potentially lucrative assets such as smart contract blockchain Solana.

Arian Neiron, Asia-Pacific chief executive at VanEck (which in Europe operates exchange traded notes linked to crypto assets including bitcoin, ether, solana, tron and polkadot) said it made sense to limit inclusion to the two largest coins by market capitalisation to begin.

“This outcome allows Australia to be a leading jurisdiction globally,” Mr Neiron told The Australian Financial Review.

“This will represent a huge move forward as investors will finally be able to access Bitcoin though a cost-effective, liquid investment vehicle. As other digital assets mature we expect the scope to broaden.”

He said VanEck expects to be the “first” ETF provider to launch a bitcoin ETF to the Australian market, but it is understood a number of rivals also have products ready to go and have been waiting for regulatory certainty.

An ASX spokesman said: “We are very aware of the high level of interest among investors for products that provide access to these assets. We are also closely monitoring developments in other jurisdictions.”

The spokesman for the market operator would not divulge how many formal applications for listing a crypto-backed ETF had been received but said it was “working with a range of issuers” and applications will be assessed in the order they were received.

At least three local fund managers announced plans to list such a product last year amid the pandemic, but the race to market was stalled after ASIC official Cathy Armour warned the regulator harboured concerns about such a product.

Chi-X chief executive Vic Jokovic said on Thursday that the market needed more certainty from the regulator. “There are fund managers that are ready,” he said. “There are a lot of people waiting for clarity.”

Meanwhile, two equities ETFs comprising stocks with crypto exposure have listed on Chi-X this month and another is slated to begin trading on the ASX in November.

ASIC’s guidance follows the release of a federal Senate committee report on crypto regulation which was praised by observers as “forward thinking”.